This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
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Investments rise and fall in value, so investors could make a loss.
Full podcast episode transcript
[0:08] Susannah Streeter: Hello and welcome to the Switch Your Money On podcast, with me, Susannah Streeter – Head of Money and Markets.
[0:13] Sarah Coles: And me, Sarah Coles – Head of Personal Finance.
[0:15] Susannah Streeter: Great to be with you again, Sarah, and it’s been fast-moving, as ever, this week – certainly, when it comes to tariffs and all the repercussions for the global economy. So, we’re gonna be looking at tariffs – we’re also gonna be looking at oil prices, the FTSE 100 reaching a record high – also stocks in the US performing strongly despite all the unpredictability – and there’s been quite a lot happening in terms of the ISAs framework, hasn’t there, Sarah? All this speculation about the Cash ISA, actually, has come to nothing.
[0:48] Sarah Coles: So far, yes. So, fingers crossed – I mean, what’s actually happened at the moment is that the Chancellor has said, ‘Look, nothing’s going to happen in the immediate future with Cash ISAs.’ So, the Government’s gonna continue talking to industry about the best way forward – but, at the moment, they’re saying no big knee-jerk reactions – no panicky changes to the Cash ISA – which is really good news for savers.
[1:06] Susannah Streeter: Yes – because there was speculation that the limit could be cut to £10,000 or even as low as £4,000, at one point. And so, the papers were absolutely full of this. We’ve all been contacted by so many different journalists to ask about what this would mean for the saving and investment horizons – and for people’s attitude towards investing. And, certainly, we wanna see a level playing field – don’t we? – and not tinkering around too much with the ISA framework ‘cause that doesn’t really help the confidence.
[1:36] Sarah Coles: Yeah – so, if you go back to where all of it came from, there was a discussion around whether or not it would help people to invest more if it was less rewarding to save.
Now, that’s quite a flawed idea – because, obviously, savers actually save for specific reasons – they may not actually know enough about investment – they may not feel confident enough to invest – so changing the tax rules around savings isn’t gonna make any difference to any of those things. And so, therefore, it was quite a flawed plan from the off – but, nevertheless, we’ve had lots of discussion – lots of uncertainty – so it’s really good to know that, in the immediate future, there’s nothing necessarily that’s going to happen right now.
[2:08] Susannah Streeter: Not right now but maybe watch this space in the future – and we will, of course, be with you every step of the way, trying to guide you through what might be happening.
Interestingly, though, I was contacted by a number of different journalists, asking, ‘Look, for those people who do want to start investing, what should they do if their ISA allowance might be cut?’ We know that’s not happened – but, still, might be useful just to run through some of the top tips and what to avoid. For example, some people who set off on their investing journey... they might try and chase the hot-stocks things that they may have seen talked about a lot on social media, but chasing hot stocks is never really a good investment strategy. You certainly don’t know when the top of the market could have been reached – and, actually, you’ve gotta look at the fundamentals of companies, themselves, rather than actually just taking tips and tricks from social media.
The other thing, of course, is lack of diversification. That is one thing concentrating your portfolio – just buying individual shares, not considering widening out those investments.
There are many more, of course – timing the market is another one – that’s what lots of investors, when they first start out, try and do, rather than time in the market, which is absolutely crucial. And, right now – with all of this uncertainty around – it is so important to keep your eye on long-term investment horizons.
So, as I said, there’s been quite a lot going on.
[3:32] Sarah Coles: Yes – there’s always plenty going on when Donald Trump is in the White House – so tell us the latest on what’s been happening with the Trump tariffs.
[3:38] Susannah Streeter: Do you remember, we had a new deadline – which was set after all those so-called reciprocal tariffs were put on pause – that Trump threatened the world with back in April? Well, that deadline has been and gone – that was July 9th. Now, we have a new deadline – August 1st – and, to some extent, what you are still seeing is this so-called TACO trade playing out.
This mantra evolved on Wall Street... is saying, ‘Trump Always Chickens Out’ (stands for TACO). So, that appeared to be helping push stocks to record highs. The FTSE 100 reached a record high – stocks on Wall Street climbed to fresh highs, again because of what was happening and this expectation there would keep being revisions. But we, then, have seen a bit more nervousness creep back in because Trump is unpredictable.
[4:30] Sarah Coles: I was gonna say... one of the things – if you say, ‘Trump always’ and then follow it with ‘Anything,’ then you’re in trouble because, you never know, this could be the time that the tariffs actually do come down.
[4:37] Susannah Streeter: Yeah – absolutely – and so there is concern about what’s going to happen with the European Union, with Mexico. But there is also some speculation that what you might see is that those nations threatened with the most onerous tariffs clubbing together as a resistance gang and showing a bit more force towards Trump – and, actually, that might be leading to some of the uncertainty, because it does seem as though there has been a bit more uncertainty creeping into markets at the start of the week.
[5:06] Sarah Coles: One of the other things that we’ve been talking about recently is the house-price market – so what’s been happening with house prices – ‘cause, actually, that has been incredibly sluggish recently.
So, obviously, we had the stamp duty deadline at the end of March – and lots of hurry and rush up to that – and then a real slump afterwards in terms of buyer interest – so house prices not going anywhere fast. One of the interesting things to watch in house prices is actually the impact of some of those changes that are being made around the rules around mortgages.
So, typically, you are allowed to have about 15% of a mortgage book... was allowed to be on multiples of 4.5 or higher – which means you can borrow 4.5 times your salary or more.
[5:42] Susannah Streeter: Yes – and, of course, when it comes to where the housing market goes, a lot of it is dependent on affordability, but also where interest rates are going – ‘cause that really does, of course, play into affordability and how expensive those loans might be.
We had the latest snapshot of how well the UK economy is doing last week – and, actually, it disappointed. A contraction of 0.1% – not a huge amount of shrinkage – but, nonetheless, there was an expectation the economy would show a few signs of growth instead.
So, it looks like the bets are that there will be an interest rate cut in August and another one by the end of the year. So, that also could breathe a bit more life into the housing market.
[6:27] Sarah Coles: So, I guess one of the things that feeds into all of these sort of questions about interest rates is what’s happening with the broader global influences on inflation – and a big part of that’s oil prices.
What’s going on in that market at the moment?
[6:37] Susannah Streeter: Well, it’s a bit volatile, actually. So, you have had all of this concern about the impact of Trump’s tariffs on the global economy, which is acting as a lid on prices. But also, you’ve got decisions by OPEC about production – that’s playing into it – and the other element is, of course, geopolitical tensions. And, most recently, we’ve got this expectation that the United States may be tougher on Russia – and increase sanctions – and there are negotiations and talks going on among European leaders as well – and negotiators – to look at putting another package of sanctions against Moscow. And, by limiting the amount of oil that Russia can sell – or at least the price that it can sell on global markets – there’s an expectation that there could be lower supply coming from Russia onto the market – and that’s lifted oil prices a little bit.
But, of course, we’re in a state of flux. There are so many different convergent issues – but, at the last count, was trading closer to $70 a barrel for a barrel of Brent crude.
[7:39] Sarah Coles: So, there’s loads of different moving parts going on – and we’ve talked about all the different aspects of the market. So, I guess, obviously, one of the answers to what I’m gonna say – and the big question people will be asking is, ‘What shall I do about my investments?’
Now, obviously, a really important part of diversification that you’ve talked about... are there any other approaches that you think would really suit people in this sort of environment?
[7:57] Susannah Streeter: There are a certain number of factors at play that are going to influence where financial markets go next – not least interest rates in the United States – and just how quickly they may be cut. At the moment the Federal Reserve looks more like sitting on the fence – still seeing how interest rates are gonna play out – and then, of course, you’ve got corporate earnings – just how resilient the US economy is.
Those are to watch for, I would say, in the short to medium term – but, longer-term, of course, investing has to be a longer-term gain. You’ve got to keep your eye on those long-term horizons. Make sure you are well-diversified across a range of different asset classes – and don’t be swayed by all this short-term noise.
Remember what happened in April, of course – you saw this real doom-and-gloom descend – we were on this rollercoaster ride – but then, of course, there was that recovery – and that’s what stock markets tend to do... is go on this kind of volatile, short-term ride.
If you are uncertain about the valuations of certain tech stocks, for example – and you know how dominant they are on the US markets – it may be worth looking at other geographies. The UK, for example – the UK market does offer some really good dividend-paying stocks – really good for those investors who really want to have an income, particularly in retirement. So, there are certain geographical sectors that can offer that kind of diversification.
And, as I’ve just been talking about, Helen – there’s a lot of volatility, a lot of uncertainty, and unpredictability around – and, for some investors, that’s really disconcerting when they are looking ahead to their retirement, and they need that stable income – they need that reassurance. What changes are afoot in the regulatory sphere that actually might benefit them?
[9:44] Helen Morrissey: Okay – so I think one of the most important ones is the whole work around the Advice Guidance Boundary – and I think this is gonna be a real game changer for people saving for their retirements. Because, previously, providers have been quite limited in the support that they can give to their customers in terms of decision-making. They don’t want to be seen to be straying into being seen to be giving advice to their customers.
Now, this Advice Guidance work that’s going through will enable companies to give people ideas around based on what people like you do. And I think this is gonna be really interesting for people going into retirement – because we’ve had auto-enrolment in workplace pensions – it’s been amazing. More of us are in pensions – more of us are saving – but not very many people are actively engaging – it’s all done through inertia. So, there’s concerns that people might not be saving enough – they might be concerned about their investments. So, when we have times of great volatility, people might be worried – go into knee-jerk reactions that they could later come to regret.
These Advice Guidance changes can really help steer people – give them some really important information that they can use to inform their retirement strategies, going forward.
[11:03] Sarah Coles: And I guess there’s lots of times when people really need that support – one of the key ones is when people thinking about how much to pay into their pension.
[11:09] Helen Morrissey: Absolutely. With auto-enrolment, we have auto-enrolment minimum contributions, which are usually set around 8%. Now, for some people, that will be enough to give them the kind of retirement that they want – but, for many other people, it won’t – and, at the moment, they might not feel that they’re getting enough guidance there to help them boost their contributions – and that’s where these changes can come in and say... you know, for people like you – if you’re looking to boost your retirement income, maybe these are the things that you need to be thinking about – and that could be taking the opportunity when you have a wage increase, for instance, to boost your contributions that bit further – and really help you to build up that pension.
[11:48] Sarah Coles: And, I suppose, if you’ve been building a pension through inertia through all this process, you’ve not really engaged. I guess, the point at which you come to retire... suddenly, you’ve got to be engaged – you’ve got to know how to draw an income. I guess it can help at that stage too.
[11:58] Helen Morrissey: I think it would be really helpful at that age. As you say, many people will have gone the whole way through their working career – they’ve been building this pension in the background, which is fantastic, but then they go, ‘Got to make some really big decisions now’ – and they might not know where to go to get that information. And, obviously, it’s really important to say there is a really good government-backed guidance service called Pension Wise – that people can go and speak to in the run up to their retirement – but, being able to go and get that bit more help from their provider – in terms of how things work and what they need to be looking out for – will really help.
[12:32] Susannah Streeter: It’s another line on the check-list to do, isn’t it?!
[12:34] Helen Morrissey: Absolutely.
[12:35] Susannah Streeter: Just a bit more admin – but we aim to make it easier for you!
[12:38] Sarah Coles: We should also say – when we talk about pensions – that you cannot get your hands on your pension ‘til the age of 55, and that is rising to the age of 57 in 2028.
[12:46] Susannah Streeter: Yes – and pension ISA and tax rules can change and the benefits, of course, will depend on personal circumstances. And Helen has already mentioned Pension Wise – I’ll give it another shout out. Really useful ‘cause it’s a free, impartial service to help you understand your retirement options.
So, it’s just time for our mini-news quiz of the week – and we’re going to look at the economic effect of big tours. It isn’t the Minis Theatre Club that I spent a long time backstage at [laughs] – at one area of Bristol over the past month – although I’m sure it did lift that one high-street’s economy. We are talking big star – we’re talking Taylor Swift, who was credited with bringing an additional £1bn to the UK economy through increased spending when she went on tour.
Now, this July – unless you have been a dark room somewhere, lying down – which you might have been – but you can’t have missed the fact that Oasis have been getting fans to open their wallets. They played their first gig since the band reformed in Cardiff’s Principality Stadium – not too far from here.
So, while it’s too early to put in an overall figure on the effect of increased sales, what extent do you think there was a pick-up in the numbers of people visiting Cardiff city centre and retail parks over the weekend that Oasis played?
Was it a 10% uplift in footfall – a 25% uplift – or a 50% uplift?
[14:10] Helen Morrissey: I’m gonna go big – I’m gonna go 50%.
[14:13] Sarah Coles: [Laughs] I think I’m also going to go big. I think the other spending that’s around... all the people I know who went, they seem to... because playing as Oasis – like buying the bucket hat, and buying the t-shirts, and everything else – so there’s gotta be a lot of money in the economy through those sorts of things as well.
[14:26] Helen Morrissey: Absolutely, yeah!
[14:28] Susannah Streeter: It was in fact a 25% uplift – certainly not to be sniffed at – really good for all those bucket-hat sellers in Cardiff.
Okay – for a bonus point – which country did Beyoncé have such an effect on increased sales in that it lifted the nation’s inflation reading substantially?
[14:46] Sarah Coles: I think I vaguely remember this. I think it was somewhere in Scandinavia – that’s as close as I’m gonna go.
[14:52] Susannah Streeter: Helen?
[14:53] Helen Morrissey: Ooh! Now, I do vaguely remember this too. Could it be somewhere like Sweden? I’m gonna...
[15:00] Susannah Streeter: Oh, ...
[15:00] Helen Morrissey: ...take Sarah’s...
[15:01] Susannah Streeter: ...yes!
[15:01] Sarah Coles: [Laughs]
[15:03] Susannah Streeter: Helen has the Beyoncé bounce – it was indeed Sweden. The headline rate came in, unexpectedly, at 9.7%. I mean, it was when rates in many countries were high – but, actually, it came above [inaudible 15:14] expectations of rates to be around 9.4% - and it was put down to that boost from Beyoncé affecting hospitality, in particular. Although, I’m not sure the Gallagher brothers are really gonna move our rate of inflation – we’ll have to see.
[15:29] Sarah Coles: Yes – although, maybe they are indeed mad for it – I won’t try and do the accent – that’d just be horrendous!
[15:34] Susannah Streeter: Before we go, ...
[15:34] Sarah Coles: [Laughs]
[15:34] Susannah Streeter: ...we should say that this was recorded on 14th July and all information was correct at the time of recording.
[15:39] Sarah Coles: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Investments and any income they produce can rise and fall in value, so you could get back less than you invest – and past performance is not a guide to the future. Tax rules can change and benefits depend on individual circumstances.
[15:51] Susannah Streeter: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
[16:02] Sarah Coles: And this hasn’t been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.
[16:08] Non-independent research is not subject to FCA rules prohibiting dealing ahead of research – however, HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.
[16:20] Sarah Coles: You can see our full non-independent research disclosure on our website for more information.
So, all that’s left is for us to thank Helen for coming in – and our Producer, Elizabeth Hotson.
[16:28] Susannah Streeter: Thank you very much for listening – we’ll be back again soon. Goodbye!
[16:31] Sarah Coles: Goodbye!
[16:32] Helen Morrissey: Goodbye!